Harley Davidson Case Study
In Partial Fulfillment of the Course Requirements for MBA 5302
July 24, 2013
Harley Davidson, established in 1903, is the largest manufacturer of motorcycles in the United States. While Harley Davidson dominates the moto market in the United States, it is very small compared to the international market which is infiltrated with large Japanese firms such as Kawasaki, Honda and Yamaha who produce various categories of motorcycles. Harley Davidson has deep rooted brand equity in the United States and remains loyal in it’s style. It has also remained consistent in manufacturing only heavyweight motorcycles. By showcasing only a single model type, Harley Davidson has established itself as a leader in the United States market. Other international markets, especially Europe and Asia, produce many lines of sports motorcycles (street bikes, scooters etc), as this meets the demands of these markets. Harley Davidson classifies their bikes into three main heavyweight categories (1) Touring Bikes, (2) Custom Bikes, and (3) Sportster Bikes. More than half of Harley Davidson’s revenue is generated from sales from within the United States, with a much smaller presence in Europe, Asia and Latin America. Harley Davidson has tried unsuccessfully to acquire additional motorycle companies twice since its origination but ultimately has continued to keep its product lines simple and focused around a few primary products. Description of Data and Sources
Initialal research was conducted on the history of Harley Davidson Motorcycles by researching their website. Data was then obtained from a variety of sources including industry journals, annual sales reports, and company websites. By comparing sales and annual (10k) reports to those of its competitors, we were able to determine market patterns and explain the market structure in which Harley Davidson Motorcycle competes. Sales reports compared units sold by the Harley Davidson , as well as competition among firms internationally displayed by the type of bikes sold and in which geographic areas.
Explanation of Methods
In order to establish initial market structure and competitiveness, we collected data on the total units of Heavyweight motorcycles sold in 2012 in the United States. We gathered data on the numbers of units sold by Harley Davidson’s top three competitors, which we learned were Honda, Kawasaki and Yamaha, respectively. In order to establish a price per unit, we took the median price of each firm’s heavyweight inventory and then took an average based on these figures. The number of units sold multiplied times average price per unit gave us an accurate reflection of over sales for 2012 when cross referenced with annual report data. Our data had some limitations as some firm’s data did not highlight units sold or sales revenue from the heavyweight market. We had to deduce and infer with the data we were given. Another limitation in data collection came when gathering information about price mark up and marginal cost. We sought information from industry experts who had insight in this area. Analysis and Results
The C4 four-firm concentration ratio of .880 indicates that there are only a few firms who produce most of the industry’s output. The heavyweight industry is highly concentrated. Most of this industry’s output is produced by Harley Davidson, Honda, Yamaha and Kawasaki. The Herfindahl-Hirschman Index (HHI) is 3,586 out of 10,000. This suggests that there are multiple firms in the industry who consume a considerable part of the market share. The top four firms account for almost 40% of the market. This number would deter an investor when considering a possible merger. Demand and Pricing Structure/Lerner Index
The Lerner Index for a Harley Davidson is .25 and the mark-up is 1.3. HD charges a price 25% over the marginal cost or 1.3 times the actual marginal cost. In...
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